Crunching the numbers - Nike (NKE) Analysis - Part 4

Checked Nike's book for the past several years, nothing is alarming here.

Growth
In 2004, Nike generated revenue 12,253.1M and in 2008, 18,627M, the average growth rate is 11.7%; operating income in 2004 is 1,549.7M and in 2008, 2,433.7M, the average growth rate is 14.3%. So historically, a great great company. We will look at the future growth potential in one of the future posts.

Return on Asset (ROA)
I put together the numbers from Nike and two of its closest competitors, Under Armour and Adidas.

Company	2008	2007	2006	2005	2004	Average
Adidas (ADDYY)	6.60%	6.60%	6.84%	7.52%	7.30%	6.97%
Under Armour (UA)	10.89%	15.46%	15.81%	9.16%	12.91%	12.85%
NIKE (NKE)	16.28%	14.51%	14.92%	14.52%	12.95%	14.63%

Observation 1: The number for Nike is very healthy.
Observation 2: In Net Margin, Nike is better than Under Armour, although partially owing to lower tax rate. UA is better in Asset Turn Over. Actually I was surprised by the performance of UA.
Observation 3: Normally Adidas sells cheaper and has deeper discount, somewhat it seems they struggle to find the ingredients in the design that will make people (maybe only me) excited. Also since Adidas acquired Reebok, the latter gradually lost its characteristics, becoming dull and boring. Anyway, it is not perceived to be an excellently run company, and the number confirms it.

Return on Equity (ROE)

Company	2008	2007	2006	2005	2004	Average
Adidas (ADDYY)	21.06%	17.75%	17.53%	18.83%	18.83%	18.8%
Under Armour (UA)	16.12%	21.24%	21.35%	16.75%	67.47%	18.87%
NIKE (NKE)	23.78%	25.37%	22.41%	23.34%	23.24%	23.63%

Observation 1: Again very healthy numbers for Nike, a clear winner here.
Observation 2: The UA 2004 number is skewed by the unusually high debt level. Its average is based on the last four years.
Observation 3: Adidas posted similar numbers as the other two, but was boosted by much higher Financial Leverage (higher debt level).

Financial Health
As of 2009, Nike has a Current Ratio at 2.89, Quick Ratio at 1.44, Debt/Equity at 0.05, and around 1 billion cash in hand. Looks like a company well prepared to survive the recession.

(source: www.morningstar.com)